Santander’s announcement which affects anyone with a 123 bank account

Santander has issued an announcement to all customers with a 123 current account.

The bank has increased interest rates as competition between providers ramps up.

The annual in-credit interest rate on the 123, Select, and Private current accounts has increased to 1.75 per cent on balances up to £20,000, from 1.50 per cent, reports The Liverpool Echo.

On Tuesday, November 8, the new rate of interest should have been automatically applied, allowing customers to now earn up to £347.22 in interest per year, in addition to any cashback they earn on selected household bills paid by direct debit.

The previous rate was 1.50 per cent, and has already been increased several times this year.

It had previously been whittled down several times amid years of low interest rates.

Cashback on household bills through the 123 accounts is capped at £5 in each of three different cashback tiers.

Customers can earn 1 per cent cashback on council tax bills, mobile and home phone bills, broadband and paid-for TV packages, and Santander monthly mortgage payments.

They can receive 2 per cent cashback on gas and electricity bills, Santander home insurance premiums and Santander life insurance premiums.

They can also receive 3 per cent cashback on water bills.

There is a monthly fee of £4 for the accounts and Santander said this will remain unchanged.

Santander said the interest rate on its 123, Select, and Private current accounts is variable and does not track the Bank of England base rate.

The Bank of England hiked the base rate to 3 per cent last week, marking the latest in a string of increases.

Many savings providers have been improving their rates in recent months and some current account providers have also been upping their offers of cash to switch.